What is a Short Sale?
When a home is worth less than the balance of the mortgage, a sale would cause there to be a balance due (deficiency). In a Short Sale, the lender agrees to accept this loss on the property.

What does this mean for the seller?
A short sale allows the seller to dispose of a property without paying any costs related to its sale and often without paying the difference between the purchase price and the mortgage payoff, or deficiency.

What does this mean for the buyer?
While a short sale can be a great buy, because the buyer will pay fair market value and not an artificially inflated price, it is also a long process. The buyer will have to be prepared to wait an average of 3-4 months for a short sale to be accepted by the bank.

Why would the bank allow a short sale?
Banks often prefer to accept a short sale than a foreclosure. Due to the legal costs, a foreclosure can be much more expensive for the lender. Also, a short sale property which is occupied tends to stay in better condition than a vacant foreclosure.

What ramifications are there?
There can be several ramifications to the seller:
There may be tax implications on the forgiven debt. Certain sellers may be exempt from tax liabilities, but all sellers should consult with a tax professional.
A short sale will be reported to the credit bureaus and will negatively affect the seller's credit. However, if the seller has already fallen behind on the mortgage payments, this impact may be negligible.

Why sell short instead of letting foreclosure happen?
A short sale may impact the seller's credit less severely than a foreclosure.Also, his/her ability to buy a home in the future is better with a short sale.
The seller may be able to avoid financial responsibility of any deficiency in the event of a short sale.
A short sale allows the seller to control when and how to dispose of a property, thereby reducing the stress of the unknown in a foreclosure.

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